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What Car Insurance Do I Need?

The most confusing thing about car insurance is that it isn't a single type of coverage that you get and never think about again. There are several types of coverage available, and it's important that you understand what they are and what they will cover to ensure you get the right amount of coverage for you and your property.

If you own a vehicle, you might be asking yourself "What car insurance do I need?" The most confusing thing about car insurance is that it isn't a single type of coverage that you get and never think about again. There are several types of coverage available, and it's important that you understand what they are and what they will cover to ensure you get the right amount of coverage for you and your property. Each type of coverage serves a purpose in regards to what it pays for if your vehicle is damaged or you sustain injuries in an accident.

Only two states out of 50 don't require drivers to carry some sort of insurance: New Hampshire and Virginia. Despite the fact that these states have no minimum insurance requirements, you will still be held accountable if you cause an accident. New Hampshire sets limits on how much you will have to pay out of pocket, and Virginia makes residents pay a fee to the state if they opt to go without insurance coverage. Some states also allow residents to put up a bond in place of state minimum insurance requirements, but the amount will vary from state to state.

Types of Car Insurance Coverage Explained

When researching what type of car insurance you need, you'll want to be aware of the various types of coverage and how they work. The types of coverage that will be available to you will depend on the insurance provider you use, but the main ones you'll want to have knowledge of include:

Bodily injury liability

Property damage liability

Comprehensive

Collision

Personal injury protection

Uninsured/underinsured motorist

Liability insurance is the minimum coverage you will need in most states and comprises three numbers, shares NerdWallet. These will be written on your policy in this fashion: 50/100/50. Each state varies in what their minimums are, but the numbers in this example would represent a policy that covers:

$50,000 in bodily injury per person

$100,000 in total bodily injuries per accident

$50,000 in property damage per accident

Although states do have minimum requirements for the amount of liability insurance coverage you'll need, this amount may be inadequate for you, says Policygenius. Your insurance company will only pay out the amounts you have your policy set to, so if the costs of an accident exceed that amount, you will have to pay the rest out of pocket. This could really put you at financial risk, Dave Ramsey tells us.

Having the right amount of coverage is important, and while some states have bodily injury liability limits as low as $10,000 per person and $20,000 total, if you have a lot of assets, this will not be sufficient coverage for you. Many experts, like Dave Ramsey, suggest that you have at least $500,000 worth of liability coverage to protect yourself against being sued.

On the same note, you want to make sure your property damage liability amount is set high enough as well. With many cars these days costing over $30,000, you want to ensure that your insurance will be able to cover this amount if you total someone's vehicle. If not, you could find yourself having to pay the difference for this large sum of money.

Comprehensive and collision coverage, in conjunction with liability insurance, are usually considered full coverage. According to National General Insurance, adding comprehensive coverage to your policy will cover damages to your vehicle that don't involve other drivers, such as:

Hitting a deer

Flood damage

Theft

Fallen tree limbs

These are just a few examples of the types of damages comprehensive insurance will pay for. Collision coverage is necessary if you want your insurance company to pay for repairs to your vehicle that are needed because of an accident that you caused. No one's perfect and accidents do happen, but if you want your insurance to pay for damages to your vehicle, you need to have collision coverage on your policy.

Bodily injury liability covers the injuries of other drivers and passengers involved in accidents that are your fault, but if you want your injuries to be covered by your car insurance, you will need personal injury protection on your policy. This type of coverage is required in some, but not all, states. Additionally, uninsured and underinsured motorist coverage is also sometimes required, explains Policygenius. Having this will protect you against drivers that don't have any insurance, as well as those with not enough insurance to pay for damages or injuries you sustain in an accident they cause.

By doing these things, you ensure that you're getting the best possible rate. Shopping around for insurance is key in finding a great deal. Not all insurance companies set their rates the same, so you can get a much better rate by researching several companies. Your deductible is the amount you have to pay out of pocket before the insurance company will pay out. Setting this amount higher will lower your monthly bill — just make sure it's set at an amount you can afford, should you need to pay it.

Some insurance companies will give you a discount if you take a defensive driving course after being in an accident or receiving a ticket. However, keeping your driving record clean in the first place will ultimately get you the best rates on your premium. The more you drive, the higher the likelihood of you being in an accident. As Money Under 30 explains, this is why insurance companies will reward drivers that aren't on the road too much. Certain insurance providers will install devices that track your driving in order to give you better rates.

The type of car insurance you need really depends on a variety of factors. Make sure you understand each type of coverage that is available to you so that you can get exactly the car insurance you need.

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